In April 2010 European domiciled ETFs had almost €200 bn under management. In the first four months of 2010 alone these funds received more than €14 bn in net new money. In Europe there are now 932 funds listed on the exchanges overtaking the USA with 839 listed ETFs. The sheer number of new funds implies that many ETFs are covering the same index but also that a multitude of funds are now covering very narrow or exotic market segments, often resulting in high costs, illiquid markets and non-transparent investments. MyPrivateBanking also found that funds missed their benchmark by a wider margin than in previous years.
“In general, ETFs and similar passive products are a good tool to construct a passive, market-tracking strategy”, emphasizes MyPrivateBanking`
In order to answer these concerns the MyPrivateBanking guide for private investors and wealth managers takes an in-depth look at the following major ETF risks: The tracking error; the default, the trading risks and the risks of Exotic ETFs and as well currency ETFs. The guide shows that with simple measures investors can minimize these risks and take full advantage of the passive investment opportunities opened up by ETFs.
“Less than one third of the wealth managers include ETFs in their proposal, with a total share of the assets in the portfolio on average below 10%.”, summarizes Christian Nolterieke, Managing Director of MyPrivateBanking, the disappointing results of the latest MyPrivateBanking survey of investments proposals for wealth management clients. “Investors should educate themselves about the risks of ETFs and then push their advisers to use more ETFs hereby reducing their costs significantly without hurting performance.”
Key recommendations of MyPrivateBanking are to avoid fund-of-fund-
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MyPrivateBanking.com is a swiss-based, independent platform for information and networking for wealthy clients across the world. MyPrivateBanking.com offers in-house research, detailed directories and client evaluations of wealth managers worldwide.